Annual Report 2022

Annual Report 2022

de

16. Retirement benefit plans

The Group manages defined benefit plans for its employees in various countries. The most relevant defined benefit plans exist in Switzerland and in Germany and account together for 93% (PY: 92%) of the total benefit obligations.

The following table provides an overview of the current status of the benefit obligations, plan assets and reimbursement rights of reinsurance policies.

 

 

2022

 

2021

 

 

MCHF

 

MCHF

Switzerland

 

 

 

 

Benefit obligation (for funded retirement benefit plans)

 

527.6

 

635.6

Plan assets at fair value

 

633.0

 

690.4

Funded status

 

105.4

 

54.8

 

 

 

 

 

Germany

 

 

 

 

Benefit obligation (for unfunded retirement benefit plans)

 

199.0

 

257.1

Plan assets at fair value

 

0.0

 

0.0

Funded status

 

-199.0

 

-257.1

Reimbursement rights

 

20.0

 

19.7

 

 

 

 

 

Other plans

 

 

 

 

Benefit obligation (for funded retirement benefit plans)

 

25.9

 

45.1

Benefit obligation (for unfunded retirement benefit plans)

 

26.7

 

33.5

Plan assets at fair value

 

26.9

 

48.3

Funded status

 

-25.7

 

-30.3

Reimbursement rights

 

7.4

 

7.8

 

 

 

 

 

Total

 

 

 

 

Benefit obligation (for all retirement benefit plans)

 

779.2

 

971.3

Plan assets at fair value

 

659.9

 

738.7

Funded status

 

-119.3

 

-232.6

Reimbursement rights

 

27.4

 

27.5

Swiss retirement benefit plan

The Swiss Federal Law on Occupational Retirement, Survivors’ and Disability Pension Plans (BVG) governs occupational benefits in Switzerland. An employer with employees who must be insured is obliged to set up an independent pension fund entered in the register for occupational pension providers or affiliate with such a pension fund. The “Gemeinschaftsstiftung” of the Geberit Group is a foundation legally independent from the Geberit Group that insures all Geberit employees in Switzerland for compulsory and non-compulsory benefits. The Board of Trustees manages the Foundation and consists of employer and employee representatives in a parity ratio. The tasks of the Board of Trustees are set out in the BVG and the regulations based on the BVG adopted by the Board of Trustees.

The benefits provided by the pension plan exceed the minimum prescribed by law. They are funded by the employer and employee contributions, plus the interest paid on the savings assets of the insured party at an interest rate defined annually by the Board of Trustees in accordance with the legal provisions. If an insured party leaves the Geberit Group and/or the pension plan before reaching retirement age, the vested benefits accrued under the BVG are transferred to the new pension fund of the insured party. In addition to the funds brought into the pension plan by the insured party, these vested benefits consist of the employer and employee contributions, plus a supplement prescribed by law. The pension benefits comprise lifelong retirement pensions, disability benefits and death benefits for the surviving dependents. On retirement, a maximum of 50% of the retirement assets can be withdrawn in the form of a lump sum. The employer and employees pay an equal contribution to the pension fund, which is settled monthly. The contribution amount is determined by the employee’s age and is calculated as a percentage of the pensionable salary.

If the pension fund is underfunded in accordance with the BVG, the Board of Trustees is obliged by law to initiate measures to rectify the situation, such as reducing the interest paid on retirement assets, reducing the benefit entitlement, or collecting remedial contributions. Legally accrued benefits may not be reduced. With remedial contributions, the risk is shared between the employer and employees and the employer is not legally obliged to pay more than 50% of the additional contributions. The technical funding ratio of this Foundation in accordance with the BVG was 112.6% as at 31 December 2022 (PY: 125.9%).

If a pension fund is overfunded as defined in IAS 19, the surplus funds are available to the company only to a very limited extent. The economic benefit for Geberit lies in future reductions in contributions and is calculated in accordance with IFRIC 14.

The Board of Trustees is responsible for deciding on a strategy for investment of the plan assets. The objective is to achieve medium-term and long-term congruence and sustainability between the plan assets and the pension obligations under the BVG. Taking into account the foundation’s risk capacity, the investment strategy is defined as a targeted long-term investment structure.

German retirement benefit plans

In Germany, there are capital account plans and annuity plans. The annuity plans are closed-end funds.

Capital account plans

The benefit plans and guidelines for payout are agreed in labour-management contracts. The employer can change the conditions by applying provisos. There can be special commitments based on the labour-management contracts or individual agreements, sometimes with annuity options. There is no minimum financing obligation.

Every year, a pension contribution is determined as a percentage of the pensionable salary or the employees can choose an amount of deferred compensation with or without employer contributions. This then serves as the age-dependent component on which a pension is accrued. The pension components accrued during the years of active service, including any resulting promises of fixed bonus payments and the initial credit from the transitional arrangement, are paid out in the form of a one-off lump sum or in instalments. Annuitisation is possible with the consent of the employer. The pension is not dependent on the employee’s final salary.

The employer manages the retirement accounts, informs the employees of the balance of their retirement assets, manages the claims and makes payments, sometimes involving the services of external service providers. When paying a lifelong pension, the employer must monitor the statutory and contractual obligations to adjust the pension and makes adjustments when necessary.

If a lump-sum benefit is annuitised, the lifelong payment of the pension and possible subsequent widow’s or widower’s pension can trigger a longevity risk. Thanks to the contractual adjustment rules applying to annuitisation, the statutory obligation to make (and review) adjustments is not currently seen to harbour any inflation risk.

The deferred compensation with/without employer contributions and possible demographic contributions retained by the employer are paid into reinsurance policies where the employer is the beneficiary. This partly covers the pension obligations.

With the aim of further harmonising the company pension scheme of the German companies, a new pension plan came into force in 2022, which will completely replace the existing capital account plans on expiry of the contribution period of several years of the capital account plans explained above. Beneficiaries of the new pension plan in 2022 were exclusively employees who began their employment with Geberit in the year it was launched, existing non-pay-scale employees of the ceramic companies who were not included in the previous employer-financed pension plan as well as existing employees of the ceramic sites who declared their change from the old to the new scheme. Due to the contribution period of several years of the old pension plans, the portion of the benefit obligations for the new pension plan recognised as liabilities as at 31 December 2022 is largely limited to the new employees and is therefore of minor importance. The contribution period of the old employer-financed capital account plans is 10 years for each of the Pfullendorf and Langenfeld sites and 5 years for the Lichtenstein site.

Annuity plans

Annuity plans are governed by labour-management contracts or individual employment contracts. § 16 of the Company Pensions Act imposes an obligation on the employer to review the adjustment of pension payments. The extent of the adjustment requirement is usually determined by the consumer price index. Some individual employment contracts impose a contractual adjustment obligation. There is no minimum financing obligation.

These are closed-end funds. Pension commitments as prescribed by the Essener Verband (Essen Association) have been made to some active employees. Fixed euro entitlements are maintained for departing employees with vested rights. Annuities are paid out to the beneficiaries in the form of lifelong monthly pension payments that include survivors’ benefit entitlements.

The employer manages entitlements and claims and makes payments, sometimes involving the services of external service providers. It monitors the statutory and contractual obligations to adjust the pension and makes adjustments when necessary.

The lifelong payment of the pension and possible subsequent widow’s or widower’s pension can trigger a longevity risk. The statutory obligation to make (and review) adjustments can also harbour an inflation risk.

The net periodic pension costs of all defined benefit plans of the Group were as follows:

 

 

2022

 

2021

 

 

MCHF

 

MCHF

Current service cost

 

38.6

 

41.7

Past service cost

 

0.2

 

-0.4

Contributions of employees

 

-11.6

 

-11.5

Net interest cost for retirement benefit plans

 

2.2

 

1.9

Net periodic pension cost

 

29.4

 

31.7

The current service cost for the Swiss retirement benefit plan was MCHF 25.3 in 2022 (PY: MCHF 27.1) and for the German retirement benefit plans MCHF 12.0 (PY: MCHF 13.4). The past service cost for the Swiss retirement benefit plan (Gemeinschaftsstiftung) was MCHF -0.4 in 2021, which is a technical effect related to plan changes according to IAS 19. The future pension benefits of the active members were reduced due to the steadily increasing life expectancy and low interest rates environment. The net interest cost for the Swiss retirement benefit plan was MCHF -0.3 in 2022 (PY: MCHF 0.0) and for the German retirement benefit plans MCHF 2.3 (PY: MCHF 1.7).

The following table shows the remeasurements for the defined benefit plans in other comprehensive income in the Consolidated Statement of Comprehensive Income:

 

 

2022

 

2021

 

 

MCHF

 

MCHF

Actuarial gains (-)/losses:

 

-188.1

 

-54.8

- of which from changes in demographic assumptions

 

-0.2

 

-31.7

- of which from changes in financial assumptions

 

-208.9

 

-47.0

- of which from experience adjustments

 

21.0

 

23.9

Return on plan assets (excluding interest based on discount rate)

 

78.3

 

-60.2

Return on reimbursement rights (excluding interest based on discount rate)

 

0.0

 

-0.2

Asset ceiling adjustment (for the Swiss retirement benefit plans)

 

102.4

 

0.0

Total pre-tax remeasurements recognised in other comprehensive income

 

-7.4

 

-115.2

The remeasurements recognised in other comprehensive income in the Consolidated Statement of Comprehensive Income in 2022 for the Swiss retirement benefit plan amounted to MCHF +45.7 (PY: MCHF -100.4) and for the German retirement benefit plans to MCHF -50.9 (PY: MCHF -9.3).

The following tables show the changes in benefit obligations, plan assets and reimbursement rights from 1 January to 31 December:

 

 

2022

 

2021

 

 

MCHF

 

MCHF

Benefit obligation

 

 

 

 

At beginning of year

 

971.3

 

1,021.6

Current service cost

 

38.6

 

41.7

Past service cost

 

0.2

 

-0.4

Interest cost

 

6.4

 

3.6

Actuarial gains (-)/losses

 

-188.1

 

-54.8

New plans/plan adjustments

 

-0.2

 

-0.1

Benefits paid

 

-29.6

 

-26.1

Translation differences

 

-19.4

 

-14.2

Benefit obligation at end of year

 

779.2

 

971.3

 

 

2022

 

2021

 

 

MCHF

 

MCHF

Plan assets at fair value

 

 

 

 

At beginning of year

 

738.7

 

675.1

Interest income (based on discount rate)

 

3.6

 

1.2

Return on plan assets (excluding interest based on discount rate)

 

-78.3

 

60.2

Contributions of employees

 

11.0

 

10.7

Contributions of employers

 

8.6

 

6.1

New plans/plan adjustments

 

-0.1

 

0.0

Benefits paid

 

-19.0

 

-15.4

Translation differences

 

-4.6

 

0.8

Plan assets at fair value at end of year

 

659.9

 

738.7

 

 

 

 

 

Funded status at end of year

 

-119.3

 

-232.6

Asset ceiling adjustment

 

-102.4

 

0.0

Assets from defined benefit plans (see Note 10)

 

-4.3

 

-58.8

Net funded status at end of year

 

-226.0

 

-291.4

 

 

2022

 

2021

 

 

MCHF

 

MCHF

Asset ceiling

 

 

 

 

At beginning of year

 

0.0

 

0.0

Change

 

102.4

 

0.0

Translation differences

 

0.0

 

0.0

Asset ceiling at end of year

 

102.4

 

0.0

 

 

2022

 

2021

 

 

MCHF

 

MCHF

Fair value of reimbursement rights

 

 

 

 

At beginning of year

 

27.5

 

26.3

Interest income (based on discount rate)

 

0.6

 

0.5

Return on reimbursement rights (excluding interest based on discount rate)

 

0.0

 

0.2

Contributions of employers

 

1.1

 

1.2

Contributions of employees

 

0.6

 

0.8

Benefits paid

 

-1.5

 

-0.9

Translation differences

 

-0.9

 

-0.6

Fair value of reimbursement rights at end of year

 

27.4

 

27.5

As at 31 December 2022, the fair value of the reinsurance policies for the German retirement benefit plans was MCHF 20.1 (PY: MCHF 19.7).

The following table provides an analysis of the fair value and composition of the plan assets.

 

 

2022

 

2021

 

 

Listed on an active market

 

Other

 

Total

 

Listed on an active market

 

Other

 

Total

 

 

MCHF

 

MCHF

 

MCHF

 

MCHF

 

MCHF

 

MCHF

Equity instruments

 

219.0

 

26.0

 

245.0

 

294.7

 

22.0

 

316.7

Bonds and other debt instruments

 

117.4

 

45.4

 

162.8

 

131.1

 

45.5

 

176.6

Real estate property

 

73.1

 

136.1

 

209.2

 

62.0

 

134.2

 

196.2

Cash and cash equivalents

 

25.6

 

0.1

 

25.7

 

31.6

 

0.1

 

31.7

Other

 

4.0

 

13.2

 

17.2

 

5.4

 

12.1

 

17.5

Total

 

439.1

 

220.8

 

659.9

 

524.8

 

213.9

 

738.7

The plan assets of the Swiss retirement benefit plan was MCHF 633.0 as of 31 December 2022 and the effective income on the plan assets was -7.7% in 2022 and +9.2% in 2021. As of the end of 2022, the plan assets included MCHF 5.8 (PY: MCHF 9.8) in equity instruments of Geberit AG and MCHF 10.7 (PY: MCHF 0.0) in real estate property that is intended to be rented by Geberit companies.

The following table provides an analysis of the benefit obligations of the Swiss and German retirement benefit plans:

 

 

2022

 

2021

 

 

Active members

 

Deferred members

 

Pensioners

 

Total

 

Active members

 

Deferred members

 

Pensioners

 

Total

Plan members (number)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Swiss retirement benefit plans

 

1,373

 

 

 

596

 

1,969

 

1,370

 

 

 

594

 

1,964

German retirement benefit plans

 

6,004

 

1,044

 

330

 

7,378

 

5,505

 

917

 

336

 

6,758

Total plan members

 

7,377

 

1,044

 

926

 

9,347

 

6,875

 

917

 

930

 

8,722

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Benefit obligation (in MCHF)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Swiss retirement benefit plans

 

312.2

 

 

 

215.4

 

527.6

 

374.9

 

 

 

260.7

 

635.6

German retirement benefit plans

 

144.4

 

28.5

 

26.1

 

199.0

 

188.3

 

34.1

 

34.7

 

257.1

Total benefit obligation

 

456.6

 

28.5

 

241.5

 

726.6

 

563.2

 

34.1

 

295.4

 

892.7

Share in %

 

62.9

 

3.9

 

33.2

 

100.0

 

63.1

 

3.8

 

33.1

 

100.0

The weighted average duration of the benefit obligation for the Swiss retirement benefit plan is approx. 14 years (PY: approx. 15 years) and for the German retirement benefit plans approx. 10 years (PY: approx. 12 years).

In Switzerland there is an employer contribution reserve from which contribution payments of MCHF 2.9 were made in 2022. As at 31 December 2022, this reserve was valued at MCHF 3.0. Employer contributions for the Swiss retirement benefit plans of MCHF 10.9 are expected for the financial year 2023.

The calculation of the benefit obligations for the material retirement benefit plans was based on the following assumptions (in %):

 

 

2022

 

2021

 

 

CH

 

DE

 

CH

 

DE

Discount rate

 

2.3

 

3.4

 

0.4

 

1.05

Salary increase rate

 

1.45

 

2.6

 

1.2

 

2.5

Pension increase rate

 

0.0

 

2.1

 

0.0

 

2.0

Mortality

 

BVG 2020 generations table

 

Heubeck 2018G

 

BVG 2020 generations table

 

Heubeck 2018G

The trend for sickness cost does not affect benefit obligations in Switzerland or Germany.

The following sensitivity analysis shows how the present value of the benefit obligation for the material retirement benefit plans (CH and DE) would change if a single reporting date assumption were changed. Every assumption change was analysed separately. Interdependencies were not taken into account.

 

 

Swiss retirement benefit plans: increase (+)/reduction (‑) in present value of benefit obligation

 

German retirement benefit plans: increase (+)/reduction (‑) in present value of benefit obligation

Discount rate

 

 

 

 

Increased by 25 basis points

 

-1.1%

 

-2.3%

Reduced by 25 basis points

 

+2.2%

 

+2.4%

Salaries

 

 

 

 

Increased by 25 basis points

 

+0.03%

 

+0.01%

Reduced by 25 basis points

 

-0.03%

 

-0.01%

In addition, the Group’s consolidated income statement for 2022 included expenses for defined contribution plans of MCHF 11.6 (PY: MCHF 12.0).